Dear Tennessee Governor Haslam,
I read in an article today http://www.commercialappeal.com/news/2011/jul/06/haslam-willing-take-lead-internet-sales-tax/
where you plan to take a leadership role with other Governors in addressing the Internet Sales Tax issue.
To be frank Governor, lawmakers, both at the local and State level have gone out of their way to make Sales Tax laws complicated, cumbersome, and difficult to comply. Sales tax was invented in the 1930s during the Great depression. Yes, States were cash strapped then too. It’s fine to charge Sales Tax for one store with one location, and one tax rate. It was never designed for mail order, or today, the internet. It’s fine for a local community to vote for needed funds to build a new firehouse, a community center, or other specific need for that community. Simpler still is the setup to levy that tax. Again, the stores within that City/County simply add that tax value to the cash register. Those that live within the tax district pay extra tax; those that live outside the city don’t.
Here is the problem with online sales, even with websales from TN sellers to TN buyers: Does the buyer live inside of the city limits, or outside the city? Do they owe 6% Tax, or 5% Tax? Go by the zip code you might say. Sadly, almost all cities in the US have more than one zip code, and most zip codes divide the city/tax district. Yes, a zip+4 address is more accurate, but does TN Dept. of Revenue ave such a database? Does it have software to accurately determine tax rates for TN Buyers? I live in SC, not TN, so I don’t know, but I can tell from the research I have done that States have no such system. They may have PDF files and spreadsheet files to show tax tables, but that is a system that is unacceptable for website shopping carts.
Let me give you a real example: Myrtle Beach SC imposed a 3% tourism tax. Problem is, Myrtle Beach has 3 zip codes and the city divides all 3, so does a buyer with a Myrtle Beach address owe 6% tax or 9%? I called the City Manager, and was informed that on the MB website was an excel spreadsheet where I could figure the correct tax. Sure, that will work for a buyer shopping in their PJs @ 3am. Obviously, local lawmakers were clueless, or forgot about the problems faced from Internet Sales. Worse, in SC, it is illegal to overcharge Sales Tax, so I am unable to charge 9% for all MB Sales.
I’m sure TN faces the same complications. Across the US, there are 8,000 such tax districts. Why should I as a seller even know or care that a tax district 3000 miles away decided to have a voter approved fountain built in town square to celebrate Earth Day?
And then a comment I read in an article the other day:
http://www.bizjournals.com/sanfrancisco/blog/2011/07/amazon-tax-bad-for-big-boxes-bad-for.html
Then consider that in some states a Snickers is considered — and thus taxed as — a candy bar while a Nestle Crunch bar is not considered candy because it contains rice. Some states tax fruit juices differently based on just how much fruit is in the drink, and not all states tax clothing.
Clearly, there needs to be commonality in tax law, and I applaud SSUTA for making that effort. Still, even they do not address the 8000 tax districts, none of which are defined by zip code.
Here is another problem. Assume you succeed with Congressional action that addresses Quill v ND and online is required to collect out-of-state Sales/Use tax. Lawmakers will see the burden placed on small business and declare minimums of gross revenue before tax must be collected. How fair is that to consumers? Some websites collect tax, others don’t. Are the sellers dodging the law? Cheating? True or not, the buyer is still obligated to pay Use Tax. Either way, it leaves a lot of tax fruit hanging on the tree.
Want 100% compliance? I have an easy solution and it’s a win-win for all. Visit my blog for more details www.thedumbdog.com/blog
It would take minimal Federal Law to enact.
Have the Merchant Accounts (Visa, MC, AMEX, PayPal, Authorize.net, Google checkout, Amazon Payments) collect the tax @ POS (Point of Sale) and remit directly to the States (States pay related fees).
~ States get instant funds.
~ No privacy issues
~ Huge savings in collection costs ($0.02/transaction for a MA v $0.75 or more for small sellers)
~ $$ only transfers once v 2 or more times for online to collect then remit.
~ States collect from ALL buyers, no minimum seller thresholds required.
~ System would work for B&Ms as well as online.
~ Minimal shopping cart integrated coding required.
Yes I know, lawmakers hate the word simple, but this is the best way to collect Use Tax that buyers now are obligated to pay … and I think minimal Federal law would be required to make it all come together. Maybe you can suggest to TN lawmakers to explore the possibility to have the MAs collect/remit in your State. I would make news, and hopefully open the doors to precedence that would still allow Quill v ND to remain intact. Not being a lawyer, I can’t address that issue. Maybe you can.
Want B&Ms to get on board and support the idea? Consider this: Take an average Wal-Mart that does $10M gross sales per Qtr. @ 6% Sales tax, that’s $600K. If a merchant account gets 2% fees to xfer money, out of that $600K, that Wal Mart pays $12K in fees …. but that $$ does NOT belong to Wal-Mart! It belongs to the State DOR! Yet another out of pocket expense B&Ms (and online retail) we must endure. LOL. (Laughing Out Loud) Who said life was fair, but lawmakers could help retail by lifting this burden we endure.
King for a day? I would only request online pay a State’s base rate. Simple is what is needed. Still, as an alternative, allowing the MAs to collect tax is the best cost efficient method to get the job done.
Thank you for taking the time to read my letter. I have been following the issue and offer alternative views in my blog. Feel free to take the time to read/view/comment. http://www.thedumbdog.com/blog I look forward to working with you to resolve this issue.